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Sat 5 Apr 2014 03:38 PM

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Interview: Saudi Arabia's Sheikh Abdul Mohsen Al Hokair

Dubbed ‘the sheikh of Gulf tourism’, Abdul Mohsen Al Hokair has been running hotels and entertainment centres for nearly half a century. In an exclusive interview, the owner of the Al Hokair Group says the firm is ratcheting up its expansion plan in light of the region’s strong economy.

Interview: Saudi Arabia's Sheikh Abdul Mohsen Al Hokair

Visit Saudi Arabia for business or leisure and chances are the Al Hokair Group will be responsible for some aspect of your stay.

Split between hotel and entertainment divisions, the company — founded by entertainment and leisure pioneer Sheikh Abdul Mohsen Al Hokair in 1965 — services about 15 million visitors a year at 27 hotels in Saudi Arabia, plus two in the UAE. It also has 51 entertainment centres in both countries as well as India.

It’s been a fast-paced growth trajectory, with Al Hokair expanding geographically as well as in the scale and profile of projects since it launched a small park in Lebanon almost 50 years ago.

And it’s clearly just getting started.

“We are looking at investments in the MENA region on the whole. Qatar, Oman and Egypt are on the radar now. We believe there exists a strong potential and demand in these markets for high-quality family entertainment,” Sheikh Abdul, who oversees 5,000 employees as chairman of Al Hokair Group, tells Arabian Business.

Last month, Al Hokair, which had saw turnover worth SR2bn ($533.28m) in 2012, opened its first indoor family entertainment centre (FEC) in Dubai and the eighth in the UAE since it entered the market in 2008.

The AED30m ($8.17m) centre at Al Ghurair Mall, which comes under its UAE flagship brand Sparky’s, precedes another Sparky’s opening in Fujairah in the second quarter of 2014 and is part of the conglomerate’s AED150m ($40.84m) planned investment blitz in the UAE in the next two years.

Al Hokair vice president, marketing and business development Mishal Abdul Mohsen Al Hokair, Sheikh Abdul’s son and an heir apparent to the family business, says that after 14.3 percent revenue growth in 2013, it expects this to increase to 20 percent in 2014.

“In less than three years we will be in more than four countries,” he says. “Now we operate in India and we do have an expansion plan to go for other countries in the GCC and, overall, the MENA region.

“Our strategy is to concentrate more with the indoor mall. We do have partnerships with most of the landlords of the malls, in Saudi and outside Saudi.”

While he declines to provide an exact figure on how many new entertainment centres it plans to open, he says “for sure it will be more than five upcoming locations in the whole region within three years”. It will also be under the Sparky’s brand, which he refers to as “the baby” of the Al Hokair entertainment portfolio.

As well as Sparky’s in the UAE, its entertainment portfolio includes Saudi flagship brand Metropolis, Digital Land and Sparkyno — a compressed version of Sparky’s — for younger children. The company also runs a Gogo Toys franchise out of Saudi, and operates local franchises for brands that share mall space with its FECs, including Brioche Dorée and La Mode cafe.

However, based on Al Hokair Group’s record to date there is no reason to doubt its expansion agenda — it has opened about two centres a year in the UAE since 2010 and takes a “bigger is better” approach to its facilities. That much is clear from the Al Ghurair Mall Sparky’s impressive portolio of facilities, which includes 15 rides, an indoor ice rink, a 4D cinema, a paintball enclosure and a rapid spiral train. Overall, its group-wide entertainment centres footprint is 1.287 million sq m.

Sheikh Abdul, who has been dubbed the ‘sheikh of Gulf tourism’ for his contribution to the sector, says he chose a leisure industry business after recognising “a huge demand for quality family entertainment centres”.

After starting in Lebanon in response to a thriving Gulf tourism market, he opened his first theme park in Riyadh in the city’s Malaz district in 1970 before expanding the entertainment centres concept over the next 15 years to cover most of the kingdom. The foray into hotels began in 1985 with a series of Andalusia Apartments, with the company now operating 4,800 rooms in 29 hotels in association with six brands including Hilton, Holiday Inn and Accor and Intercontinental and Golden Tulip.

Al Hokair says it expects to grow the hotel division by more than 25 percent in the next three years, though again declines to detail a timeline or the locations for new openings.

“It’s growing up,” he says of the Middle East hotels sector. “The whole region, what I mean by region is mainly the GCC, is growing up. [It gives] us a good indication of how the business will go through the upcoming years, which encourages also the other investors and the hotel chain companies to invest.”

While Saudi Arabia and the UAE are pushing ambitious tourism agendas — tourist hotspot Dubai is targeting 20 million visitors annually by 2020 while Saudi Arabia, which has a big religious tourism market is aiming for 88 million visitors a year by the same timeframe — Al Hokair says any new openings will be “mainly targeting the MENA region… not because we are there, because we believe in this area”.

“The demand is there and the growth of the demand can give us the comfort and the encouragement to do this investment in this area,” he says.

Sheikh Abdul says new openings will likely be under its existing suite of hotel brands, adding simply “they have been a very instrumental part of our growth over the years”.

“They would be the preferred ones of choice,” he says.

Not so preferred, however, has been the slow progress of the company’s plans for the Al Sahara Kingdom hotel and entertainment project in the Dubailand development.

Billed as a 50 million sq ft area that was all set to include two four-star hotels, an indoor theme park, restaurants, residential areas and a retail souk, it was shelved after the financial crisis triggered the collapse of Dubai’s real estate market in late 2008.

The wider Dubailand project, backed by Dubai Properties Group (DPG), was originally slated to be twice the size of Walt Disney World, and was reportedly worth AED335bn ($91bn) at its peak.

Asked about the project in 2012, Al Hokair deputy CEO Sami AM Al Hokair told ITP publication Hotelier Middle East that construction on Al Sahara Kingdom would resume in 2013 with phase one to open in 2014. Two years later and Mishal Abdul Mohsen Al Hokair now suggests the opening is more likely to be in 2016, saying construction is taking place on site.

“It’s in the plan to open,” he says. “It was planned to open but however the crisis which hit all the market[s] just delayed and postponed the launching date of it. However, it will come very soon to the market.”

When pressed, he says “for sure there is construction started and we [are] expecting it to open in the coming years. We don’t have exact date, however I can say a couple of years”.

The company’s flagship property, Al Hokair Land in Rabwa Park, Riyadh, opened in 2002 with other outdoor venues such as Luna Parks in Al Madinah and Taif and waterparks in Riyadh, Yanbu and Dammam to follow.

Sheikh Abdul is coy on the question of whether the company is planning any more outdoor theme parks, after pursuing more indoor centres in air-conditioned shopping malls of late. After all, in the age of the video game, is it still an appealing and profit-making model? “Outdoor models provide varied types of entertainment activities because they are not affected by the limitations in size, height,  and shape that indoor parks face,” the 70-year-old says.

“However, both indoor and outdoor will do well, if managed and looked after by the appropriate members of the team.”

It is for the same reason that he knocks back suggestions of diversifying from Al Hokair’s core mandate of hospitality and entertainment.

“Family entertainment centres are the new norm within the entertainment industry,” he argues. “They provide the complete experience in wholesome family fun for everyone.”

Al Hokair adds: “Those are our main activities in the company which generate the 100 percent of the revenue for the company. For the time being there is no plan to go out of these two main activities, which we started more than 50 years back.”

However, the company, which is not related to Saudi retailer Fawaz Abdulaziz Alhokair, is not afraid to move on from a venture if the numbers are not right.

In 2010 it sold its subsidiary Leisure Unlimited, which held the Middle East franchise rights of global health and gym brand Fitness First, to Dubai conglomerate Landmark Group amid financial woes and following a public legal spat between UK-based Fitness First and Leisure Unlimited.

Little was said by Al Hokair Group about the deal, but Landmark’s subsequent strategy to open 22 new clubs in two years and announce a further $150m three-year investment plan last year indicates the business was in need of a cash injection to accelerate its growth.

Al Hokair says the company is still planning an IPO on the Riyadh stock exchange after the move was first flagged late last year.

At the time banking sources quoted by Reuters estimated that a listing on the Riyadh bourse could be valued at about $680m based on a potential valuation of about 13 times to its net profit.

Al Hokair, which is 35 percent-owned by Saudi private equity and investment firm Jadwa Investment Co, which bought the stake in 2012, posted revenues of about SR2bn ($533.28m) in 2012 and net profit of about SR200m ($53.33m), the sources said.

Based on a historical trend of Saudi companies typically listing 30 percent of their share capital, it could raise about $200m.

“We are in the process of doing that,” Al Hokair says of the status of the IPO.

He says he “hopes” it will come to fruition this year.

If it does, another round of expansion is likely to follow.

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